Cylinder 1 misfire and head gasket failure

I have a 2012 Prius II with 175,000 miles that I bought in summer 2019. While out-of-town on a Sunday, I had the check engine light come on. I also noticed a several second rumble (as a sound and in slightly shaking the car) from the engine a few times shortly after the gas engine kicked on. I drove the car conservatively (no hard starts or stops) for approximately 150 miles at 65 mph on the highway to return home. On Monday (the day after the code first appeared), I took the car to a local autoparts store to have them read the error code with an OBDII reader- the error indicated a misfire in cylinder 1. I took the car straight from the autoparts store to the Toyota dealership to have them diagnose the cause of the cylinder misfire.

The mechanic at the dealership diagnosed the car as having a blown head gasket with water leaking into cylinder 1. The dealership recommends that I replace the engine at a cost of approximately $5,000. The replacement engine comes from a car that had 60,000 miles. The dealership says that I could drive the car approximately another 50 miles before the engine completely locks up even though I have barely noticed any change in the car's performance other than a few short rumbles. I replaced the spark plugs, OEM PCV valve, OEM coolant for ICE, OEM coolant for inverter, and OEM transmission fluid about 9 months / 10k miles prior to this issue.

I did not replace the spark plugs with stock. I used the Denso Iridium TT plugs because they were recommended by the Denso website and I saw another user on PriusChat recommend them. Given that I now need to replace the engine, it was not worth gambling on using non-stock plugs. Of course, it's entirely possible that the engine failed for other reasons.

Other than the engine, my car is in excellent condition with a nearly pristine interior. Unfortunately, the car was involved in an accident before I bought it which damaged the rear right of the car. The car's exterior was restored prior to my purchase of it such that you wouldn't know without closely inspecting the rear of the car- there was some slight paint overspray into the interior and a body shop mechanic can tell where the exterior paint was blended.

A few questions:
- Does the diagnosis of the car sound reasonable?
- Should I get a second opinion from another mechanic such as at another Toyota dealership or an independent auto mechanic?
- Is it worth spending $5k to replace the engine when the value of the car is between $3,000 and $6,000? (Depending on which source I consult- Kelly Blue Book, Carfax, Edmunds) I assume that the value of the car is considerably hurt by the accident in its vehicle history.